Advocates renew push for protecting troops from predatory lenders

Advocates call for better enforcement of a law that protects troops from predatory lenders. (Dan Kitwood/Getty Images)

Advocates from six military and veterans organizations renewed their push for a key federal consumer agency to resume monitoring lenders to protect service members and their families from predatory practices.

Military and veteran groups are concerned about what amounts to “removing the sentries from the guard tower,”said Mike Saunders, director of military and consumer policy for the nonprofit Veterans Education Success, during a press conference held in Washington.

For years, the Consumer Financial Protection Bureau had been conducting supervisory examinations of payday lenders and others within their jurisdiction for compliance with the Military Lending Act. Among other things, the law limits interest charges to 36 percent annual percentage rate on most consumer loans to service members and their dependents. But last year, CFPB stopped these examinations, contending they don’t have the clear authority to do them.

“We must get back to proactively ensuring predators are compliant with the Military Lending Act,” said Jen Davis, government relations deputy director for the National Military Family Association. “We’re calling on the federal government to fix this on behalf of the nation’s military families.” The Veterans of Foreign Wars, American Legion, the Military Officers Association of America, and Iraq and Afghanistan Veterans of America were also represented.

The Military Lending Act of 2006, and the DoD regulations that implement that law, limit the maximum annual percentage rate to 36 percent on most consumer loans to active-duty military and their dependents, including application fees and certain other fees in the calculation. Generally, most loans’ APR would be less than 36 percent, but loans with even higher interest rates, sometimes more than 300 percent, are still available to everyone else in the civilian community. Before the 2006 law was passed, military members were the targets of these predatory lenders.

“We continue to wonder why, if CFPB has the authority to supervise for compliance with other federal consumer finance laws, why wouldn’t they have authority to supervise for compliance with the Military Lending Act?” Davis said.

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The advocates were not specific on their position about whether legislation is needed, noting that they believe the CFPB already has the authority. But they noted that the federal government needs to do whatever it takes to get to the end state of being proactive.

For months, advocates have raised concerns that removing this supervisory authority, in effect providing less monitoring of these lenders, would mean less deterrence in the marketplace. A number of groups mounted a $250,000 ad campaign last year to raise awareness of the issue. Advocates, military commanders and others generally agree that the Military Lending Act has had the desired effect of reducing the usage of payday lenders.

On Wednesday, these groups said they have not seen evidence that predatory lending practices targeting service members are returning, but want CFPB to resume its examinations to stay ahead of any potential problems.

One bill, introduced by Rep. Maxine Waters, D-Calif., and passed by the House Financial Services Committee, would require the CFPB to resume the Military Lending Act examinations, as one of a number of requirements for that bureau.

It is not hyperbole to state that financial distress compromises individual and unit combat effectiveness.

Army Col. Paul Kantwill (Ret.)

September 2, 2018

In an interview with Military Times in January, CFPB Director Kathleen Kraninger said CFPB examiners still have the ability to highlight concerns or violations of the Military Lending Act, as they’re conducting examinations for compliance with other federal laws.

“If examiners see something related to the MLA, they absolutely cite it and make the company aware of it, and to the extent it needs to be taken to the next level, we have full enforcement authority when it comes the MLA,” Kraninger said.

“What we’re seeking is narrow, explicit authority to do exams particularly on the MLA, to actively go in and do a concerted MLA-related exam,” she said.

However, asked Wednesday about whether examiners have seen any alleged violations of the Military Lending Act in their examinations related to other laws and whether any actions have been taken, the CFPB didn’t provide an answer.

In an email response, the CFPB stated, “Director Kraninger is committed to protecting America’s servicemembers, and to that end she provided draft legislation earlier this year to Congress that would grant the Bureau explicit authority to assess supervised institutions for compliance with the MLA.

“Director Kraninger will continue to work with Congress to advocate for passage of this legislation. The Bureau will continue to protect servicemembers through enforcement and coordination with other agencies as well as focusing on education efforts that empower military personnel to make informed financial decisions.”

As a result of removing the CFPB’s supervisory examinations of payday lenders, “any effort to detect fraud is now on the shoulders of service members and families” said Davis, of the National Military Family Association.

That means understanding their protections under the Military Lending Act when working with creditors, knowing who the enforcing agency is, and where to submit complaints, she said.

Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.

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